The 2014 Assets & Opportunity Scorecard finds that liquid asset
poverty rates have barely budged. The percentage of households in the US
who lack the savings needed to weather a financial storm like a job
loss or medical emergency is holding tight at 44%, suggesting that
almost half of Americans are on the brink of financial calamity. The Scorecard
also found that problems like growing student loan debt and high rates
of consumers with sub-prime credit—especially among households of
color—are to blame for Americans’ lingering inability to get ahead and
build a more secure financial future for themselves and their families.

By Mark WeisbrotIt was not because of the power of financial markets or because the Germans didn't want to "help" the Greeks that Europe suffered through about three years of recurring crises, in which the continued existence of the euro was thrown into question, until August 2012. It was because the European authorities were using these acute crises and did not want to resolve them until they had extracted certain "reforms" from the weaker European economies (and possibly even some of the stronger ones, if we consider the European Fiscal Compact and what the French government has been doing recently). We know this because as soon as the European Central Bank (ECB) wanted to do so, it put an end to these crises in a matter of weeks, in July-August 2012, by effectively establishing a ceiling on the interest rates of Italian and Spanish bonds - something it could have done at any time in the prior three years.
Read the rest here.

Yes, while it is true that New Keynesians do agree with Post Keynesians (or classical-Keynesians, in the sense of the Old Classical Political Economy School revived by Sraffa) in many policy propositions, like the need for more stimulus, Tom is absolutely right that they do occupy a position in the policy debates which precludes real Keynesian ideas to become more generally accepted.

Gerald EpsteinThe quantitative easing is when the Federal Reserve essentially prints money and then buys Treasury bills and mortgage-backed securities and other things like that. And they've been doing about $85 billion a month and are now tapering--what they call tapering it down to $65 billion a month. And by doing that, they're putting less money and credit into the economy. And when there's less money and credit in the economy, that tends to raise interest rates. And hence you've seen a big shift in financial markets here in the U.S. and all over the world as a result of this expectation that both short-term and long-term interest rates are going to go up.

David Cay Johnston: It's important that we
restore the minimum wage. We're not talking about raising it. We're
talking about restoring it. Back in the mid '60s, it was almost $11 an
hour. And education is certainly very important and too much neglected
in this country. We put huge barriers to bright but poor and
middle-class children getting first-rate educations, especially at
college. But we have much more fundamental problems than
that. Many of these problems involve things like government rules that
hardly anybody knows about that take money from the many and
redistribute it to the few, the use of tax dollars to build factories,
office buildings, and shopping malls, the rules that allow multinational
corporations--not domestic, not mom-and-pop corporations, but
multinational corporations-- to actually profit off their corporate
income taxes by delaying payment of them for 30, 40, 50 years and having
you and I let them deposit that money with the gove…

There is a certain view about current events in Argentina that tends to emphasize the potential effects of the devaluation as the collapse of the economic model, and, and, hence, suggest that the post-default process of economic growth should not be taken as an alternative for other countries in distress, like for example Greece and other Southern European countries. This kind of view, expressed for example by Walter Molano in the Financial Times (subscription required; minus the strange argument that the Argentine problem is "geographical"), suggests that policies should be aimed at pleasing international financial markets since the goal is to promote "confidence in the country’s economic management," and that devaluation is necessary for solving the "unsustainable economic imbalances."

First, it must be understood that the current devaluation, which was of the order of 20% in nominal terms in the last days of last week, is part of a plan that was most …

From Monthly Review
In this provocative study, economist Ernesto Screpanti argues that
imperialism—far from disappearing or mutating into a benign
“globalization”—has in fact entered a new phase, which he terms “global
imperialism.” This is a phase defined by multinational firms cut loose
from the nation-state framework and free to chase profits over the
entire surface of the globe. No longer dependent on nation-states for
building a political consensus that accommodates capital accumulation,
these firms seek to bend governments to their will and destroy barriers
to the free movement of capital. And while military force continues to
play an important role in imperial strategy, it is the discipline of the
global market that keeps workers in check by pitting them against each
other no matter what their national origin. This is a world in which the
so-called “labor aristocracies” of the rich nations are demolished, the
power of states to enforce checks on capital is sappe…

From The Atlantc:
What's are today's young adults really like? For those who've spent too much time gazing into the dark recesses of Thought Catalog or obsessing over "Girls," the Department of Education has a new report that offers up some enlightening answers. In the spring of 2002, the government's researchers began tracking a
group of roughly 15,000 high school sophomores—most of whom would be
roughly age 27 today—with the intention of following them through early
adulthood. Like myself, many of those students graduated college in
2008, just in time to grab a front-row seat for the collapse of Lehman
Brothers and the economic gore fest that ensued. In 2012, the
government’s researchers handed their subjects an enormous survey about
their lives in the real world. Here, I've pulled together the most
interesting findings.
Read rest here

Global elites are meeting in Davos this week. Davos Man is all for 'stakelholder' society, meaning corporate self-rule. New Report State of Power 2014 exposes the abuses of the Davos elites. Above the graph showing the 25 biggest corporations by revenue and by asset value.

First, a preliminary. It is my position, pace the public-choice school and the Marxists, that policy ideas are an independent ideological force.

Some economists, and more political scientists, disbelieve this. Many doubt there exists any role whatever for intellectual persuasion in politics, whether deductive, inductive, or "purely rhetorical." Models, characterized by their attention to the self-interest of bureaucrats and legislators, have been advanced in volume to explain the imperatives of political decision making. If these models are wholly right, then special interests govern all, the scope for discretion and hence persuasion in politics is negligible, and the study of the rhetoric of such discussion can be of only iconological interest.

To be sure, special interests are important. Ulterior motives are endemic in politics. And not all of the scholarly cynicism is misinformed. Council of Economic Advisers Chairman Murray Weidenbaum, when asked di…

Available here the Power Point presentation for Geoff's Principles class on Smith and Marx. For more you can read chapters 2 and 3 in his textbook Introduction to Political Economy (here if you want to buy it).

Edited by Al Campbell
This highly readable volume explores what contemporary models of socialism have to offer for envisioning a better world and developing feasible alternatives to neoliberalism and pervasive inequality. The book is organized around clearly stated questions that capture core issues and debates. Concise contributions from leading thinkers address the theoretical and historical justification for socialism, what a socialist society would look like, how self-interest and the interests of society can be reconciled, the stages and productive forces of socialism, and how socialist growth differs from capitalist growth. Two related book reviews are included. This volume was originally published as a special issue of Science & Society VOLUME 76, NO. 2, APRIL 2012
See here.

A recent Global Economic Governance Initiative (GEGI)G-24 policy brief by Kevin P. Gallagher, Anna Maria Viterbo, and Sarah Anderson asses the degree to which the final draft of Obama's TPP (Trans-Pacific Partnership) deal must include significant safeguards to prevent and mitigate financial crises. The authors provide an alternative legal language that could be incorporated in future trade deals such that nations have the space and flexibility requisite to ensure financial stability. In my view, however, it is perhaps highly unlikely that the power brokers of TPP would even consider or critically reflect on the far-reaching proposals. From the Intro:
The Trans Pacific Partnership (TPP) being negotiated by 12 governments represents an important opportunity for a fresh approach to the treatment of capital flow management measures in trade agreements. Most regional and bilateral free trade agreements (FTAs) and bilateral investment treaties (BITs) enacted in the past two decades ha…

An article of mine has been posted by The Hampton Institute, A Working-Class Think Tank. From the intro:
My attempt is to suggest that, although laudatory, the neo-Marxist contributions to fiscal sociology put forward by James O'Connor's (2002 [1973]) The Fiscal Crisis of the State and Erik Olin Wright's (1977) Class, Crisis, and the State ultimately fail to accurately explicate the contradictions concerning the logic of capital during times of urban economic duress. I incorporate a dialectically materialist framework that manifests the interconnections between urban governance, capital accumulation and the structure of the state, with an emphasis on what I call a Cartalist sociological approach to money as an institution of social power to make my argument. The empirical backdrop is the United States, and the aim is to reassess the theoretical significance of the so-called 'fiscal crisis of the state' and its effect on the American urban built environment, in ord…

New paper by André Nassif and Carmen Feijó in the Brazilian Journal of Political Economy (Revista de Economia Política). From the abstract:
"The main goal of our paper is to provide analytical arguments to explain why Bra- zil has not been able to restore its long-term capacity for economic growth, especially compared with its economy in the 1950-1979 period (7.3 per cent per year on aver- age) or even with a select number of emerging economies in the 1980-2010 period (6.7 per cent per year on average, against 2.3 per cent per year on average in Brazil in the same period). We build our idea of convention to growth based on the Keynesian concept of convention. For our purposes, this concept could be briefly summarized as the way in which the set of public and private economic decisions related to different objectives, such as how much to produce and invest, how much to charge for products and services, how to finance public and private debt, how to finance research and developmen…

By Gerald Friedman
While it was enacted in 2010 without a single Republican vote, the
Patient Protection and Affordable Care Act (ACA), a.k.a. “Obamacare,”
was built model first proposed by the conservative Heritage Foundation
in the 1990s and implemented by Republican Governor Mitt Romney in
Massachusetts in 2006. The ACA extends the public safety net to more of
the working poor but otherwise keeps the private health insurance system
intact. Rather than replacing the private system—and far from the
“government takeover of health care” its critics claim—it provides
subsidies for individuals to buy private health insurance through
state-level “exchanges.”
Read rest here

In a recent post, see here, it was explicated that TFP only leads to confusion in mainstream analysis
of economic growth. Jesus Felipe & John S.L. McCombie's new book provides an invaluable extensive analysis of the issue at hand.
Felipe and McCombie have gathered all of the compelling arguments
denying the existence of aggregate production functions and showing that
econometric estimates based on these fail to measure what they purport
to quantify: they are artefacts. Their critique, which ought to be read
by any economist doing empirical work, is destructive of nearly all that
is important to mainstream economics: NAIRU and potential output
measures, measures of wage elasticities, of output elasticities and of
total factor productivity growth. – Marc Lavoie, University of Ottawa, Canada
See here

The conventional discussion of Total Factor Productivity (TFP) starts from a production function. For that reason most people when they hear about the problems with TFP, think that it refers to aggregation problems (which on top many confuse with the capital debates, which did involve a critique of the production function, but was about more than that).
The problem is that TFP is NOT productivity at all. So start from a Cobb-Douglas production function (it doesn’t really matter what production function for our argument):
Log-linearizing and deriving with respect to time you obtain:
Where alpha is the share of wages in national income. Solow suggested that the residual (dA/A) must be the combined effect of the increase in productivity of all factors of production (TFP).

Now consider the income identity that by definition tells us that net income (net of taxes) is composed by the remuneration of capital and labor. We have:
There is no need here to be concerned with aggregation quest…

By Polly Cleveland
Under incoming Federal Reserve Chair Janet Yellen, the United States
Federal Reserve Bank will begin to “taper” its program of “Quantitative
Easing” or “QE”. Under QE, the Fed every month buys billions of U.S.
Treasury bonds and other Federal securities from the big banks. QE keeps
down longer-term interest rates, which will, it is hoped, encourage
investment and stimulate the economy. QE has indeed supplied the biggest banks with cheap money for
profitable trading in the international financial markets, enabling them
to recover from the 2008 crisis—and continue paying big bonuses. It has
in fact kept interest rates near zero for big banks and corporations.
By purchasing bonds from the “government-sponsored enterprises”, Fannie Mae and Freddie Mac,
which buy high-quality mortgages, QE has kept mortgage rates down and
hence values up for prime real estate. That’s nice if you qualify, or if
you’re a bank holding real estate collateral. By keeping bond yi…

An EPI Report that is worth reading on the incomplete economic goals of the civil rights movement . From the intro:
"On August 28, 1963, more than 250,000 people participated in the March on Washington for Jobs and Freedom. They marched for equal access to public accommodations, voting rights, and the end of racial discrimination in employment. While achieving the full measure of these rights remains a work-in-progress, legislative and policy commitments to these goals were secured. But the marchers also demanded the following: decent housing adequate and integrated education jobs for all a minimum wage worth more than $13 an hour today
Fifty years later, on all socioeconomic measures, African Americans still lag whites by wide margins. At the same time, economic opportunities are shrinking for working people of all races. Until we achieve all of the march’s goals, there is little hope for reducing black-white socioeconomic disparities and providing genuine opportunity for econ…

By Yanis Varoufakis
"Carmen Reinhart and Kenneth Rogoff recently published a notable IMF working paper (13/266) entitled ‘Financial and Sovereign Debt Crises: Some lessons learned and those forgotten’ (December 2013). Their overarching claim is that the advanced economies are wrong to pretend that the present levels of debt can be sustained by means of fiscal austerity and without debt restructuring, sustained inflation or a combination of the two. This is a sensible argument, well grounded on empirical and historical evidence, that governments would be wise to internalise.

However, while the general thrust of the Reinhart and Rogoff paper is indeed reasonable and in principle useful, their discussion of Eurozone debt crisis is founded on a factual error that, since 2010, has been underpinning erroneous policy responses to the Euro Crisis."
Read the rest here.

By Mark Weisbrot,
If we compare the economic recovery of the United States since the Great Recession with that of Europe – or more specifically the eurozone countries – the differences are striking, and instructive. The U.S. recession technically lasted about a year and a half – from December 2007 to June 2009. (Of course, for America’s 20.3 million unemployed and underemployed, and millions of others, the recession never ended – but more on that below.) The eurozone had a similar-length recession from about January 2008 to April 2009; but then it fell into a longer recession in the third quarter of 2011 that lasted for about another two years; it may be exiting that recession currently.
Read the rest here.

You have to remember that corporations, like Monsanto, are certainly NOT in the business of providing food security. But on the other hand, it is also important not to forget that without genetic manipulation the Green Revolution would not have been possible. In fact, certain crops (like corn, shown above) would not even exist.

The documentary below provides a very skeptical view of GM crops and their role in economic development.
The guy in the documentary, Jimmy Doherty is an advocate of what they term sustainable farming, and while he is not for the use of GM crops he is not completely against them. In my view, progressives have been unable to untangle their dislike for corporations use of GM crops to further their power, with their anti-GM stance.

The World Bank suggests that the slowdown in the periphery is good, since it has moved several countries from a positive output gap, with excess demand, to sustainable positions with negative output gaps, as shown in the graph below (h/t Otaviano Canuto; source here).
Note that Brazil, China, and India are in this category. Argentina still has excess demand. Potential GDP, which given Okun's Law imply a certain level of unemployment and connect the concept with the other neoclassical standard assumption of a natural rate of unemployment, are quite low in many developing countries if you believe the World Bank.

These are, in the World Bank's view, of course, supply side constraints that are not affected in any way by demand forces, even if the evidence in favor of the accelerator, which suggests that capacity adjusts to demand, is overwhelming.

Also in the new issue of ROKE. From the abstract:
The narrative as well as the analysis of deregulated finance in the global economy remain incomplete unless one relates to the surges as well as volatility in capital flows which are experienced by the emerging economies. An analysis as above needs to consider the implications of capital flows in those economies, especially in terms of the ‘impossibility’ of adopting monetary policies which benefit growth in the national economy. There is also a need to recognise the role of uncertainty and the related changes in market expectations in the (precautionary) accumulations of the large official reserves as are held by these countries. The consequences are found to affect the fabric of growth and distribution in these economies. Recent experiences of China and India, with their deregulated financial sectors, bear this out.
Financial integration and free capital mobility, which are supposed to generate growth with stability in terms of the…

The video below (in Spanish) explains Prebisch's intellectual evolution from the creation of the Argentinean Central Bank (BCRA) to his Economic Dynamic Lectures at the Universidad de Buenos Aires (UBA).

A paper covering some of these issues is available here. The full video is here.

In a previous post (see here), I had argued that the capitalist world economy can be conceived as resting on the dependence of historically-specific hegemonic institutions, whose rise and fall follow the trajectory of long waves, what Giovanni Arrighi defined as systemic cycles of accumulation (SCA's), periods of approximately 40-60 years, separated by A phases and B phases (see here). Lucas Bernard, Aleksandr V. Gervorkyan, Thomas I. Palley, and Willi Semmler, however, offer a penetrating critique of this central tenant of the world-systems tradition.

From the abstract:
This paper explores long wave theory, including Kondratieff’s theory of cycles in
production and relative prices; Kuznets’ theory of cycles arising from
infrastructure investments; Schumpeter`s theory of cycles due to waves of
technological innovation; Goodwin`s theory of cyclical growth based on
employment and wage share dynamics; Keynes – Kaldor – Kalecki demand and
investment oriented theories of cycles; and M…

Here are the highlights of the China-Latin America Economic Bulletin published by the Pardee Center and written by Rebecca Ray and Kevin P. Gallagher.
• LAC exports to China have soared since 2000, but slowed in 2012, stalling to a 7.2 percent growth rate in real dollar terms, compared to average annual export growth to China at 23 percent from 2006 to 2011.
• Behind this slowdown are falling commodity prices. LAC exporters are “running in place” as exports to China have continued to grow in volume, but have fallen in price, leading to stagnant total export values. • More than half of all LAC exports remain concentrated in three broad sectors related to copper, iron, and soy—with the majority of these exports concentrated in three countries: Brazil, Argentina, and Chile. These sectors are all prone to large price swings, contributing further to the slowdown in the value of exports to China. • Chinese exports to LAC are diverse and mostly in manufacturing, with a heavy emphasis on el…

Or at least is what The Economist says (here). Graph below shows a very long series for commodity prices.

Note that the cycle (super or not) is less visible than the trend (hints of Prebisch-Singer). At any rate, the fall in 2009 and the recovery and then slow fall after 2011 imply that the overall index is now higher than at the lowest point in the series, the late 1990s, and around the same place it was in the early 1950s.

In the new issue of the Review of Keynesian Economics (ROKE) you can read Gary's paper (here). From the abstract:
A crisis that started as a textbook case of how financial and asset markets can spin out of control without adequate public oversight has transmuted in 5 years into a crisis of irresponsible sovereigns, such that restoring prosperity requires that governments re-establish control over their own excessive spending. How did this happen? This paper explains the recovery of position by pro-market, restricted-government proponents in economics on the basis of political divides and segmented lines of communication within the academic economics profession. These political divides involve a double invisibilization of power within economics: an invisibilization both of the political purposes served by a profession whose leading models deny the relevance of social and political power, and of the ideational barriers to entry into ‘mainstream’ departments. The argument is motivat…

By Mark Weisbrot
It was 20 years ago that the North American Free Trade Agreement between the US, Canada, and Mexico was implemented. In Washington, the date coincided with an outbreak of the bacteria cryptosporidium in the city's water supply, with residents having to boil their water before drinking it. The joke in town was, "See what happens, NAFTA takes effect and you can't drink the water here."But what about Mexico? Didn’t Mexico at least benefit from the agreement? Well if we look at the past 20 years, it’s not a pretty picture. The most basic measure of economic progress, especially for a developing country like Mexico, is the growth of income (or GDP) per person. Out of 20 Latin American countries (South and Central America plus Mexico), Mexico ranks 18, with growth of less than 1 percent annually since 1994. It is of course possible to argue that Mexico would have done even worse without NAFTA, but then the question would be, why?
Read the rest here.

At a briefing at the Economic Policy Institute on Tuesday, January 14, 2014, Jason Furman (Chairman of the White House Council of Economic Advisers), Sen. Tom Harkin (D-Iowa), Rep. George Miller (D-Calif.) and Lawrence Mishel of the EPI discussed the economic case for raising the federal minimum wage and the path forward to enact the Fair Minimum Wage Act of 2013.

EPI research shows (see here) the Harkin-Miller bill would give a raise to 27.8 million workers, who would receive about $35 billion in additional wages. A $10.10 minimum wage would increase GDP by $22 billion, creating roughly 85,000 new jobs.

Mind you, raising the federal minimum wage to $10.10 is meager...should be at at least $20.00, which would provide more than just a 'modest boost' to the US economy.

George Stigler, author of the famous The Theory of Price, winner of the Sveriges Riksbank Prize (aka the Nobel) and Friedman's best friend at Chicago, suggested long ago that: "the professional study of economics makes one politically conservative." His reasons for that particular view are extensive, but one factor was associated with the decline of the dominance of the labor theory of value and the rise of the supply and demand (marginalist) approach, that he embraced. In his words:
"It could be argued that there is one powerful factor making for conservatism: the inability of a very radical young economist to get a desirable university post. It is indeed true that a believer in the labor theory of value could not get a professorship at a major American university, although the reason would be that the professors could not bring themselves to believe that he was both honest and intelligent, and I hope they are not improper in their demand that a professor be at l…

By Ann Robertson and Bill Leumer
Obama’s contribution to the privatization campaign has centered for the most part on education. But before we can evaluate its impact, it is necessary to consider the different forms privatization can take in relation to schools, since it can occupy different positions on a wide spectrum of possibilities. At one end of the spectrum lie completely privatized schools that provide their own financing and govern themselves. But many schools are more like hybrids, a mixture of private and public. Charter schools, whose numbers are growing rapidly, are funded with public money (that previously would have gone to public schools) but are privately operated. Often they are run by for-profit or non-profit national companies, as opposed to simply a group of teachers who want to break away from traditional schools and experiment with an alternative curriculum. Similarly, essentially public universities or K-12 schools might make use of online courses produced by …

The mass movements starting in June 2013 were the largest and most significant protests in Brazil in a generation, and they have shaken up the country's political system. Their explosive growth, size and extraordinary reach caught everyone – the left, the right, and the government – by surprise. This article examines these movements in light of the achievements and shortcomings of the democratic transition, in the mid-1980s, and the experience of the federal administrations led by the Workers’ Party since 2003.

By Jake Johnston and Stephan Lefebvre of CEPR. From the abstract:
This paper presents a broad overview of economic and social trends in Honduras since 2006, including the years following the military coup of June 2009. It finds that economic inequality in Honduras has increased dramatically since 2010, while poverty has worsened, unemployment has increased and underemployment has risen sharply, with many more workers receiving less than the minimum wage. While some of the decline was initially due to the global recession that began in 2008, much of it is a result of policy choices, including a decrease in social spending.
Read rest here.

The economy added just 74,000 jobs in December, and the unemployment rate fell to 6.7%, according to the Bureau of Labor Statistics (BLS). In other words, the labor market situation is still pretty bad. Yes the unemployment rate declined during 2013, but in part it resulted from the fact that the labor force participation rate declined by
0.8% point over the year, that is less people trying to find work.
The figure shows how the current recovery looks weak, in particular when compared to the 1990s one, and why it has been insufficient to deal with a more profound crisis (as can also be seen in the figure when compared to the milder collapse of the dot-com bubble).

By Dr. Victor E. Kappeler
In the 1920s, the concept of ideology passed through another transformation in its quest for meaning. Karl Mannheim (1893-1947), a Hungarian-born sociologist, took on the project of developing a “sociology of knowledge.” He directly engaged the subject of ideology as articulated by Marx in hopes of developing an objective, yet interpretative, social science approach to the study of ideas. In his quest to understand “the social and activist roots of thinking” (1936: 4), he hoped to develop a theory of ideology that would guide political action and practice. He resituated de Tracy’s “science of ideas” from the domain of the natural sciences to that of sociology. As an advocate of the social science approach to understanding, he advanced a structuralist view of ideology. He theorized a distinction between “particular” and “total” ideologies. Under this framework, particular ideologies were characterized by distortion and fabrications—the intentional misrepresen…

From the Introduction:
A strong labor market with full employment need not be a rare economic anomaly that returns roughly twice for every one appearance of Halley’s Comet. Full employment can be a regular feature of the policy landscape, with tremendous benefits for rising living standards, poverty reduction, the federal budget, and equitable economic growth. In this book we present the benefits and importance of full employment in ways that are particularly germane to the economy today, and we offer policies to begin moving to full employment now. Full employment can be defined as the level of employment at which additional demand in the economy will not create more employment. All workers who seek a job have one, they are working for as many hours as they want to or can, and they are receiving a wage that is broadly consistent with their productivity.
Full PDF here.

In two previous posts, dated 2011 and 2013,
Matías Vernengo clarified that the ISLM model can accommodate changes
that incorporate the criticisms of several heterodox groups. In
particular, he stresses that the ISLM can accommodate an investment
function in which the level of activity (rather than the rate of
interest) is central, so that the accelerator can be incorporated. More
importantly, he also states the ISLM does not imply a natural rate of
unemployment, thus allowing for relevant discussion of policy issues.

Both these aspects can be found in Oskar Lange's 1938
contribution to the neoclassical synthesis, in which he assumes that
investment (mostly) depends on consumption, which in turn is permanently
distorted by the “irrational” distribution of income, typical of any
capitalist economy. More precisely, Lange outlines the mutual dependence of investment and consumption as a sort of ‘indirect’ relationship.